Bitcoin ATMs Explained-I Had No Idea

12-13-23

Opening Comments

My last note was entitled, “Boys Night Out in Miami.” The most opened links were freed hostages were sexually assaulted and the Antisemitic professor who was suspended in a “sex for grades” scandal. I had to reshow my least favorite piece of art from Basel as well. More feedback on Casadonna. The ambiance gets an A+ from all if you sit outside. A couple of people did not love the food. They ordered the wrong dishes. Check what I outlined to get and you won’t be disappointed, but if it is ONLY amazing food you want, I would go elsewhere. If it is scene, ambiance, food and fun, Casadonna is the place.

I am off to NYC tomorrow on the 6am flight. I am there for a couple days on some meetings, working on art deals, and looking at an apartment deal for investment purposes. I am also spending time with a world-class art collector and get to see his amazing collection again. I am going for a very fun annual holiday party that I have only missed twice in 15 years (COVID). I love the hosts and see a lot of old JPM friends.

• Video of the Day-New Tesla Robot-Optimus Gen 2

• Bitcoin ATMs-I Had No Idea

• Quick Bites

  • Markets

  • Household Net Worth Changes

  • Auto Loan Rejection Rates at 11%

  • Macy’s Sale

  • Madoff Update

  • Latest Biden/Israel Poll Results

• Israel

• Other Headlines

• Real Estate

  • Crazy S. FL Insurance Story-Must Read for All Homeowners

  • Great Charts on the Housing Market

  • R/E Agents Struggling to Pay Office Rent

Video of the Day-New TSLA Robot-Optimus Gen 2

• Musk sure is a genius, albeit a bit unhinged in many respects. The new robot is shown in the attached video and it is very impressive. It is more refined than the previous model I am a little scared by it but eventually, I want one. Note how the robot walks and the fine motor skills. TSLA announced you cannot sell the new truck for a year for face penalty. “Tesla may seek injunctive relief to prevent the transfer of title of the Vehicle or demand liquidated damages from you in the amount of $50,000 or the value received as consideration for the sale or transfer, whichever is greater.” This headline has me concerned: Tesla recalls nearly all vehicles sold in US to fix system that monitors drivers using Autopilot. I never bought autopilot, as I did not think it was ready. Almost 2mm vehicles recalled.

Bitcoin ATMs-I had No Idea

Jack played in the flag football league at Asphalt Greens in NYC called, “Friday Night Lights” about 10 years ago. On his team was an uncoordinated kid and his father was on the sidelines with me each game. I vividly recall games in February where it was freezing and the kids were unable to throw the ball. I was miserably cold and could not believe the kids were required to play.

The father proceeded to tell me he owned Bitcoin ATMs. This was when Bitcoin was trading on either side of $100 and I thought you must be insane to own it. He told me that 100% of his net worth was in Bitcoin. I thought he was an idiot. I have no idea what happened to him, but presume he is a billionaire today. Despite him telling me to put 10% of my net worth in BTC, I passed (BIG MISTAKE). As you can see from the chart below, BTC has had a great deal of volatility over the years. My piece today is meant to discuss Bitcoin ATMs and is not a statement on the price of BTC.

I had not taken my boat out in a while and decided to fish a couple of weeks ago. I called up a friend to go with me and he said he could not make it, but I should bring a buddy of his. I was going solo, so I told him to introduce me. Let’s call his friend, “Dave.” We met at the boat and went out to fish. Dave told me he runs a company that owns hundreds of Bitcoin ATMs. I was reminded of the miss form 10 years ago so I drilled him on the business model and was shocked by it. I will outline our discussion for your edification.

There are about 80 players in the market with the biggest one, Bitcoin Depot, having a 23% market share with approximately 6,500 Bitcoin ATMs in the USA out of approximately 28,000. A machine costs about $10,000 to buy.

He told me that before the pandemic, there were 2,000 BTC ATMs in the US and his were doing $20,000/month in gross revenues (amount being converted). This would result in $4,000/month of net revenues which have 50% margins (rent, security fees, cost of ATMs, banking fees…). Today, there are 28,000 BTC ATMs in the US and his average $10,000/month in gross revenues. Competition is up sharply, but the size of the pie has exploded. Bitcoin ATMs charge a 18-30% VIG and ONLY take cash in many instances. This means that if you want to convert $1,000 into BTC, you get $800 worth of crypto due to ATM fees. Sure is a lot higher than the $2 charge when taking out cash from a competitor bank!

Global Bitcoin ATMs

Global Data

For perspective, early in the pandemic when things were crazy and fears were running through the system, my friend’s Bitcoin ATMs were averaging $50,000/month and some single machines were doing as much as $250,000/month in gross revenues!

Interestingly, my new fishing buddy met with Signature Bank and they told him that lending to Bitcoin ATM’s was too risky and they would not consider it. How funny is that based on the fact that the bank ran into issues for aggressive practices? Bitcoin ATMs sure feel a heck of a lot safer than the crap Signature was doing.

Who uses BTC ATMs? Some of it is for illicit activities. However, the majority of users are unbanked or underbanked including illegal immigrants who cannot get banking relationships.

I just found the entire discussion enlightening and was surprised by the prevalence of BTC ATMs having never seen one in person. It also brought up horrible memories of 10 years prior when I was told to buy Bitcoin at about $100 and passed convinced it was a dumb idea. One of my 100 big misses in my life and I am sure there will be more.

Quick Bites

• The CPI increased .1% in November and was +3.1% from a year ago. Excluding volatile food and energy prices, the core CPI increased 0.3% on the month and 4% from a year ago. A 2.3% decrease in energy prices helped keep inflation in check, as gasoline fell 6% and fuel oil was off 2.7%. Food prices increased 0.2%. YTD, the S&P is now +22% and Nasdaq +40% after another big rally Wednesday. Indices were up 1.4%+ after the Fed suggested at least 3 rate cuts in 2024. The Dow hit an all-time high and crossed 37,000. As of Wednesday am, the market was pricing in 100bps of cuts in 2024, but the CNBC survey suggests 76bps of cuts (closer to the Fed). I did not feel the stock returns were possible in 2023 and not sure very many others did either. Regional bank stocks outperformed the KBW Index +3.7% and the S&P Regional Bank ETF +5.4%. Post Fed, Treasury yields fell sharply with the 2-year -27bps to 4.43% and the 10-year -18bps to 4.03%. Another positive has been oil which has been slammed pushing gas prices 19% lower since September. Oil is approaching the lows for the year below $70/barrel. I filled up for $2.84 the other day. If we have a soft landing (looking more likely), it would be a miraculous save by what has been an inept Fed that largely caused the problems in the first place.

  

  

  

• Interesting CNBC article entitled, “Household wealth grew 30% between 2019 and 2021—here’s who gained the most.” Despite the economic chaos spurred by the onset of the Covid-19 pandemic in the U.S. — a brief but sharp recession, millions of layoffs and eventually, record-high inflation — consumers have mostly recovered.  In fact, the median U.S. household was nearly $40,000 wealthier in 2021 than in 2019, according to new data from Pew Research. Pew used data from the U.S. Census Bureau’s three latest Surveys of Income and Program Participation to determine how household wealth changed during the pandemic. U.S. households had a median net worth of $128,200 in 2019, which rose to $166,900 in 2021, Pew found. Here’s how household wealth changed between 2019 and 2021.

• Auto loan rejection rates keep climbing and hit 11%, more than double the level from 2022 according to the Federal Reserve Bank of NY. The rejection rate was 1.1% in early 2021, but mid-single digits seems more “normal.” Prices for new and used cars are still elevated and higher interest rates mean car payments have increased, too. The average monthly payment for a new car, according to Experian, was $726 in the third quarter of 2023, up from $701 in 2022 and $617 in 2021. One reason auto lenders are less willing to approve loans is that more Americans have been falling behind on car payments amid high inflation and high interest rates.

• Arkhouse Management and Brigade Capital Management have offered to buy Macy’s Inc. for $5.8 billion, according to people familiar with the matter. The offer values the retailer at $21 per share, compared to the company’s most recent close at just over $17 per share. Macy’s sales have slumped over the past year as the legacy retailer struggles to keep up with online competitors. I just feel brick-and-mortar department stores face a challenge in this market. In the past 4 years, I have been to a department store exactly twice and only bought zero items. Macy’s stock jumped 20% on the news. The positive news is Macy’s owns a lot of real estate with some estimates as high as $11bn. However, as of 10/23, the company had $6.2bn of debt on its books.

  

• The court-appointed trustee overseeing the liquidation of Bernie Madoff's firm has earned $1.5 billion in fees since his appointment 15 years ago, a Reuters analysis found. The total amount of returned funds is $14.6 billion. Investors are estimated to have lost $17.5 billion in the fraud. None of the firm's revenues from the case are paid out of recovered funds. Instead, they are paid by the Securities Investor Protection Corporation, a nonprofit that Congress created in 1970 to help investors recover funds from failed brokerage firms. I remember the day the fraud was announced as I was at the holiday party for my kids’ nursery school in NYC. The mood in the room was awful in December 2008. Seems like yesterday. Madoff was a member of my golf club and I saw him all the time. The lives he damaged and lies he told were unbelievable.

  

• Interesting CBS News/YouGov Poll on Biden/Israel/Inflation. President Joe Biden’s backing for Israel in its war with Hamas is alienating at least a third of Democrats, a CBS News/YouGov poll showed, as criticism of his administration’s stance grows. The share of Democrats who said Biden has shown too much support rose to 38% from 28% in October, according to the poll, which has a 5 percentage-point margin of error. The growing civilian toll of Israel’s military operation in response to the Oct. 7 attack by Hamas has drawn increasingly pointed calls for restraint from Democratic lawmakers, US officials and protesters, adding to political risks for Biden as he campaigns for a second term. About three quarters of CBS poll respondents, or 76%, said their income isn’t keeping up with rising prices, 62% said the US economy is in bad shape and 56% blamed government spending for inflation. Biden’s approval rating hit a low in a WSJ poll published Saturday, with the president lagging former President Donald Trump by 47% to 43% in a hypothetical election matchup. Also, Haley has Biden by 17 points in a recent WSJ poll.

  

Israel

• Historically, I have not been a Bill Ackman fan. I thought he was an arrogant blowhard. Now, I love the man and believe his leadership is something other important business leaders can learn from. He has been vocal and has called out the hypocrisy at these top schools and has crushed Harvard. I ask you to read his Twitter link about Harvard President, Claudine Gay and the damage done to the school. A lot of AMAZING points are made in the article, but the most powerful one is a GREAT lesson from Charlie Munger. “As Charlie Munger of blessed memory advised: “Invert, always invert,” i.e., turn a situation or a problem upside down to better understand and solve it. Using Mr. Munger’s rubric, let’s assume that the office of president at Harvard were vacant. Knowing what we know now, would Harvard consider Claudine Gay for the position? The answer is definitively “No.” With this simple thought experiment, the board’s decision on President Gay could not be more straightforward.” Bill, thank you for your leadership during these chaotic times. As an aside, I have a good number of students from top schools who read the Rosen Report and many of the Jewish students are scared, depressed, and sad at what is taking place on their campuses. It is not fair and I am not sure my kids would want to endure it.

  • Is Claudine Gay a Plagiarist?

    • The article suggests Harvard President plagiarized her PhD dissertation and cites the passages. The paper has been reviewed by Harvard and they did not believe she violated standards for research misconduct. The school tried to cover up the investigation and used a high-powered law firm to threaten journalists who were looking into it. It looks like blatant plagiarism to me and some of the authors of the papers in question feel the same.

      

    • Harvard president's handling of antisemitism has cost school more than $1 billion

• Can Hamas actually be eliminated? This is what military and security analysts think

  • I felt it would be near impossible, but the experts weigh in on this CNBC article.

• Hamas threatens to kill all remaining hostages if demands are not met

• Amid outcry over Gaza tactics, videos of soldiers acting maliciously create new headache for Israel

• Netanyahu: Surrender of ‘dozens’ of Hamas terrorists a sign of ‘the beginning of the end’

  • “In the past few days, dozens of Hamas terrorists have surrendered before our forces. They put down their weapons and turn themselves over to our brave fighters,” Netanyahu says in a video statement.

• From Which River to Which Sea?

  • College students don’t know, yet they agree with the slogan. Concerning WSJ Opinion Piece on the lack of knowledge of college students who are chanting anti-Israel slogans.

• Majority of Americans Back Israel as Democrats Split Over War With Hamas, WSJ Poll Finds

  • Note 18-34 and Democrat support of Palestinians in the poll. In the 2nd picture, note the support between Democrats and Republicans of an Antisemitism Bill. Over 100 Dems did not support the bill compared with 4 Republicans. 1-In-5 Young Americans Say Holocaust Was A Myth, Twice As Many Democrats As Republicans.

    

  

• Iowa poll: Trump surpasses 50% support ahead of first GOP contest

  • The former president leads Ron DeSantis among likely Iowa caucus goers, 51% to 19%, with Nikki Haley at 16%.

• California coffee shop fires employees involved in antisemitic behavior towards Jewish customer

  • There are pictures of the Antisemitic employees and I hope they are never hired for the rest of their lives. One suggestion is to deport them to Gaza. I will personally pay for their one-way plane tickets.

• Family Event Sabotaged. Check out the video of cops clashing with protestors.

  • Crazy video.

• Elderly Jewish couple beaten with belt by man who screamed ‘give me your earrings, Jew’ while on their way to Beverly Hills synagogue

Other Headlines

• Evercore ISI sees big pullback in first half of 2024 as recession ‘materializes’

  • The firm sees the S&P 500 falling in the first half of next year to 3,970 as a “recession materializes and politics [amplify] volatility.” After that, it expects the broad market index to bounce back up to 4,750 by year-end as inflation hits the Federal Reserve’s 2% target. 

• Warren Buffet Selling $28.7 Billion in Stock Rings Alarm Bells Over Economy

  • The article discusses stock sales, $157bn in cash, and M2 contraction.

• Citadel to Return $7 Billion of Profit to Hedge Fund Clients

  • Brilliant. Velvet rope idea. His returns are massively outperforming as seen below from Business Insider. Griffin and Geffen Donated $400mm To Memorial Sloan Kettering as well.

    

• Bank credit has officially entered contraction territory

  

• Ford cuts planned 2024 production of electric F-150 Lightning in half

• Federal jury decides Google’s Android app store benefits from anticompetitive barriers

• Hasbro laying off 1,100 workers as weak toy sales persist into holiday season

• Oracle shares fall more than 12% on light cloud revenue

• Musk’s X 2023 Ad Sales Projected to Slump to About $2.5 Billion

• Troubled retailer Sears quietly reopens two stores. What is behind the comeback?

  • Sears stores had been awful for decades. I have no idea what they are thinking in trying to compete today with Amazon. Please make the stock public with a big float so I can short it.

    

• Canada's surging cost of living fuels reverse immigration

  • Interesting article with some staggering #s of people leaving Canada. However, an aggressive immigration policy is offsetting those leaving.

• Trump cannot assert presidential immunity in E Jean Carroll defamation lawsuit, appeals court rules

• Biden is suppressing all opposition so I don’t beat him, says Democrat challenger

  • He has no chance, but I would take him all day long over Biden. He was fantastic on the All-In Podcast a couple weeks ago.

• Rashida Tlaib Says ‘Invisible’ Americans Propel Her Through Israel-Hamas War Firestorm

  • Detroit-area congresswoman’s vocal criticism of Biden’s support for Israel has galvanized her supporters back home

• Teen charged with threatening NYC subway massacre busted day before he vowed to shoot ‘anybody I see’

• Texas police arrest illegal immigrant in teen cheerleader's murder, mother 'praying for justice' for her slain child

  • Nothing will make me say that our immigration and border policy is good for America or its citizens. This has been an unmitigated disaster. 3mm “encounters” by US Customers fiscal 2023. The highest # in US history. We need to demand better. In August, 75% of “inadmissible aliens” were let in by Homeland Security. A PGA Tour winner came to my house for dinner Tuesday night and he told me at the Phoenix airport, there were dozens of illegal immigrants at the TSA without IDs allowed to board planes.

• IBM Slapped With Federal Civil Rights Complaint After Racist CEO's "Obviously Illegal" Hiring Practices Leak

  • Watch the video of the CEO. It is UNFATHOMABLE. If you don’t discriminate, you lose your bonus and get fired. IBM pulled from advertising from “X” due to zero tolerance for discrimination.

    

• San Francisco Democrat says homelessness crisis in his district is 'absolutely the result of capitalism'

  • How many reasons are there to never live in San Fran or CA? Capitalism is why San Fran is a disgusting place riddled with crime, homelessness, drugs, filth? Could bad policies and soft on crime DAs have anything to do with it? The District Supervisor wants to defund the police. What could possibly go wrong? Watch this video from the past week. DISGUSTING. The young engineer does a great job in stating his case with the issues in San Fran.

• Jeffrey Epstein flight log subpoena request denied by Democrat-led Senate Judiciary Committee, Blackburn says

  • Why the videos of all these powerful men have not been released is beyond me. How Epstein did not have it released upon his death is amazing. Why is the release blocked? Americans deserve the right to know. I would like more transparency by both parties.

• Hunter Biden Defies Subpoena, Lashes Out at ‘Trump Attack Machine’ in Stunning News Conference

• Comparing crime rates to 2019 show just how dangerous ‘reforms’ have been

  

• Time Person of the Year is Taylor Swift

  • I wrote a piece entitled, “Why I Love Taylor Swift.” She has done amazing things in a short time and had an incredible economic impact on cities she has gone to tour. Remarkable entertainer and business person. Her tour took in over $1bn in 60 dates. My one caveat, I do not believe she has spoken out against Hamas but did attend a Gaza fundraiser.

    

• The No. 1 way to respond when your in-laws are rude to you, says Harvard-trained etiquette expert

  • It is funny, that I keep citing “Harvard-Trained” experts but based on what is going on at Harvard and the ineptitude of leadership, I just don’t find it to be so impressive today.

• Harvard psychologist: If you use any of these 7 phrases every day, you ‘may have low emotional intelligence’

• Elon Musk restores X account of conspiracy theorist Alex Jones

  • Why? Jones is an awful human who said so many inhumane things. I would never let him on X.

• Kanye West plans shock new career move that he’s been developing for months and even has demo website

  • He is considering his own news channel? Just what we need is another antisemitic news organization from an unhinged operator. Kanye wore a KKK outfit and spoke of more Jew hate.

• Historic Nova Scotia Hotel Moved 30 Feet Using 700 Bars Of Ivory Soap

  • The hotel weighs 220-tons.

• German Bundeswehr Inspector General warns of potential defensive war against Russia

• Russia has lost 87% of troops it had prior to start of Ukraine war, according to US intelligence assessment

  • Seems nearly impossible to me.

• Bill Belichick ‘to leave New England Patriots at end of season’ after 24 years in charge following disastrous run

Real Estate

• I wrote about my friend and neighbor’s house insurance dilemma.  He was paying $17k for his homeowner’s policy with low deductibles. They canceled him and the best price he could get was $85k for worse coverage with higher deductibles. The insurance company just asked to have his 20-year-old home reappraised and they told him to rebuild would be $5.9mm and the new policy would be $117k. For his total coverage including cars, jewelry, umbrella… he would need to pay $130k.  He did not feel the need for $5.9mm of coverage and was disappointed by the total cost increase in recent months.  For perspective, he was paying a total of $27k previously including cars, umbrella, contents…My friend uncovered an insurance agent of 43 years who helped him restructure the policy to get him the coverage he wanted at a $60k savings.  The total insurance costs went down from $130k to $70k.  The new coverage is with Chubb. However, the wind portion of the home policy is with Lloyds of London. My point is simple, there are alternatives and creative insurance agents that go the extra mile.  The Agency Owner is Kevin Lang at Lang Insurance, it’s worth a call. They write home, auto, valuables, umbrella, and watercraft policies in all 50 states and my readers are in every state but Alaska. I believe Kevin is worth a call (866.964.4434) and only uses high-net-worth insurance companies (Chubb, Pure, AIG, Cincinnati, Berkley One and Lloyds of London, Etc.). There is no downside to getting a quote from him. I plan to as well.

• WSJ article entitled, “The Math for Buying a Home No Longer Works. These Charts Show You Why.” It follows the article from my last piece where I outlined the lack of affordability of my childhood home today which saw its price increase from $60k to $440k. It is now less affordable than any time in recent history to buy a home, and the math isn’t changing any time soon. Home prices aren’t expected to go back to prepandemic levels. The Federal Reserve, which started raising rates aggressively early last year to curb inflation, hasn’t shown much interest in cutting them. Mortgage rates slipped to about 7% last week, the lowest in several months, but they are still more than double what they were two years ago. Many more amazing charts in the link.

• Homeowners are staying put while new buyers are grappling with persistently high housing costs this year. Inventory is tight and home sales have hit multi-decade lows. But if you need yet another sign of turmoil, just ask the people whose livelihoods depend on the real estate market how they’re doing. According to a monthly report by Alignable, 45% of real estate agents who own their firms said they had trouble paying rent on their offices in November. That’s 5% higher than in October and 10% higher than September's reading. Although mortgage rates have been retreating over the past few weeks, they’re not low enough just yet to convince homeowners who previously locked in 2% to 3% rates to put their homes for sale and relocate. Yet another reason to call Eric Rosen for your luxury housing needs. I am not worried about my rent but am concerned that you are getting properly represented in buying and selling your home.

  

© 2023 The Rosen Report LLC. All rights reserved. Does not constitute investment, financial, legal or tax advice. Consult with your lawyers and professional financial advisers.

Rosen Report™ #638 ©Copyright 2023 Written By Eric Rosen